Climbing the Wealth Ladder
ofdollarsanddata.com
ofdollarsanddata.com
> More importantly though, the best way to climb the wealth ladder is to spend money according to your level.
As far as I (a non-economist) can personally tell, any notion of climbing up some abstract wealth ladder is synonym with a salary increase for the vast majority of people. Other methods, whether they involve quantity of free time or already-available money, are intrinsically tied to the quality of your job or, failing that, the quality of your parents' or partner's jobs.
Personal net worth, while definitely an important factor in this equation, is far less so than income in my opinion. A fiscally irresponsibly professional worker living from paycheck to paycheck has "grocery freedom" while a person with 10,000$ of accumulated wealth and no income whatsoever (let's say they are between jobs) is far more likely to buy the store brand margarine. Similarly, the former will most likely not achieve "travel freedom" without decades of hard work, of careful spending, of saving, investing, etc.
Simply put, no amount of "not carelessly booking flights" will turn you into Jay-Z, let alone into that small business owner across the street with the McMansion and the gaudy Christmas decorations. The undisputed "best way" to climb the wealth ladder is to receive large amounts of cash from some external source.
See yourself spending near all you get, even getting significant income increases and you get stuck into a loop of ever spending more. Its also very risky, as if that incomes downfalls, it can easily cost you all the small stupidly useless property you already have.
I think the idea is to control your spending and find ways to increase income. I bet jayz continuously did that or he would have ended up like many other stars who lost it all. Or maybe just luck/talent..
Even furnishing a savings account is a privilege many people cannot afford, and no amount of frugality will help them. Only access to higher quality jobs.
If you ask me, Jay-Z gambled on the entertainment industry and won. His gambling chips were talent and hard work.
In any case, you have something like 30 grands on hand, which you wouldn't have otherwise. That's cash down on a house.
(maybe somewhere on earth it is?)
$3000/year = 250/mo starting from 0, 10 years = 120 months, 3%/year (S&P500, after taxes and inflation), gives $34,935.36.
20 years gives $82,075.50.
Outside of real outlier status where you're paid really, really large amounts of money for your services (like notable entertainer or cardiac surgeon) the way to wealth is to own the means of production. Period.
Same as it ever was.
Most of the paths from middle-class to wealth involve avoiding frivolous spending.
My point being that actually owning that successful business is the mechanism for wealth. Avoiding frivolous spending can be very, very helpful to achieving that status, as you point out correctly, but it isn't actually the status itself.
This article and many others seem to be unable to make that key distinction.
Do you think the bad habits go away just because you succeeded? That’s not how life works, and the evidence is people who win the lottery.
What happens if the software business doesn't succeeded to the extent that it dwarfs the level of debt? What if it doesn't succeed at all?
Google says cardiac surgeons make $400-800k, assuming that's true a very talented engineer at FAANG can easily match this (staff or senior staff level) without being mired by an additional 10 years of school. I personally know engineers making 7 digits in liquid compensation. Obviously these are not your average engineers, but it's doable if you're the 1% (to be good enough for FAANG) of the 1% (to be amongst the best at FAANG) of engineering talent - so this isn't most people.
Just throwing it out there because I imagine most readers here are engineers and you make it sound like it's an impossibility for any of us. I bet at least a handful of readers here are engineers making over $500k.
So even from those that could make it very few stay long enough to make these great riches your imagining.
[0] https://www.payscale.com/data-packages/employee-loyalty/full... [1] https://www.businessinsider.com/average-employee-tenure-rete... [2] https://brobible.com/culture/article/how-long-employees-stay...
TC is not computed using the total value of your grants, it’s based on the amount that will vest over the course of a year. Yes, that means there are engineers getting grants of $2m+ over four years (putting TC around $700k+)
The most accurate source for compensation I currently know of is https://www.levels.fyi/
Do you think there are 4000 engineers that make over $500k?
Engineers at Google can make over $500k starting at the staff level, so I think my estimate of 1,000 is pretty conservative considering the company has over 100,000 employees.
* She worked 67 years at the same job.
* She invested in individual stocks, mostly during a period when index funds weren't available. This lack of diversification is almost unanimously not recommended for regular people because the vast majority of people who try it dramatically underperform index funds. But if enough people do it someone will dramatically outperform and you'll read about them in the paper.
* It sounds like she lived more frugally than most people would find tolerable.
* She lived in a rent controlled apartment, meaning her rent was probably closer to free than to market rates for much of her life. Needless to say, this subsidy isn't available to young people today.
* Presumably she avoided major illness or other setbacks during her long working life.
* It's also possible that she had an inheritance or some other significant source of income besides her salary.
$1M or $2M in inflation-adjusted savings is probably a realistic goal for a middle class American to have for retirement after a long career and prudent investing. $8M is not.
Sampling biais: there's no going to be any article on the people who lost all their money doing this
Sounds like an issue with most people.
>* She lived in a rent controlled apartment, meaning her rent was probably closer to free than to market rates for much of her life. Needless to say, this subsidy isn't available to young people today.
The subsidy is available via home purchase. Fixed-rate mortgage payments don't increase over time.
I wonder what fraction of the population reaches $1M in retirement fund by the time they retire. If 401(k) median balances by age are at all accurate, then the answer seems to be "very few."
> In 1947, she joined Cleary Gottlieb Steen & Hamilton, a Wall Street law firm, where she worked as a legal secretary for 67 years and observed the investment strategies of the lawyers.
> “She was a secretary in an era when they ran their boss’ lives, including their personal investments,” Lockshin tells the Times. “So when the boss would buy a stock, she would make the purchase for him, and then buy the same stock for herself, but in a smaller amount because she was on a secretary’s salary.”
So she was likely a reasonably well paid secretary at a wall street legal firm that would have access to the best financial advice available.
Also, as far as I can tell from the article, she was married but didn't have any kids.
That's huge. Kids are expensive (and the risk they expose you to, economically, is truly enormous) and that money tends to come out at the younger end of one's years, and when you're earning less, just to compound the pain (and maximize the opportunity cost).
I've probably had hundreds of conversations with people who will say "well, not everyone can afford to move town" or "not everyone can afford to take a week off work" or whatever else.
That's an enormous handicap - you're basically a slave to your current job, and if it tires you out enough that you can't train/learn/do other productive work outside of it, then you're stuck.
Personally I grew up with essentially zero, and pretty much self-enforced level 1 upon myself until this chart would have me at level 4.
People talk a lot about how certain startup founders aren't really risking anything because they start out with a safety net. You can create that safety net for yourself, with a little luck along the way, provided that you're sensible.
even if you can, financially, it's often hard to do so mentally/emotionally. if you're taking time away from work, that means no income - whether you desperately need it or not may be immaterial to the mental state you've built for yourself.
If you have 4 weeks' worth of spending saved then it's difficult.
If you have 40, then it's fairly easy.
If you have 400, it's trivial.
as it stands, I've got perhaps... ~5 years of living expenses saved up. Certainly enough to not worry about a few days of non-income, but it's.. certainly not FU money. 25 years of expenses lined up seems like it might give you more breathing room, but, I suspect your comfort level and goal posts move.
when I was in big debt, I thought "man, just having $1k in the bank will make all the difference, and I'll be fine". and when I got there, I was 'fine' for about 10 minutes. Then the goal was $2k. Then 5. Then 10. Then 30. And so on. For me, there's a realization that it's moderately hard to earn and keep that money, and that it can be reduced rather quickly, so.... keeping earning income is still top of mind, at least for another few years.
You really think you couldn't walk out of a job and find another one in a few months? Will you even notice that drop in savings aside from as a theoretical number on a spreadsheet?
It sounds to me like you have a complex about this rather than it being in any sense rational. (I don't mean that as an insult at all.)
5 years is less than the amount of time it took for me to go from a skint teenager in a dead end town, to a graduate with a full time job.
And yes, it's sort of a complex. I have to remind myself that yes, I can pay the extra 50c and get cheese on the burger if I feel like it. I'd lived 30+ years without being able to do that (meaning that adding cheese a few times would be noticeable at the end of a week), it's a hard mental state to break from. Not 'working' means ... a day where savings isn't going up, etc.
Replenishing the spent money is simultaneously both easier (larger savings tends to grow in larger chunks) and harder (takes longer to earn new money vs the compounding of earlier money, and takes more of the remaining time I have left, which is always depleting).
I'm not claiming it's entirely rational, by any means, and that's why I was saying earlier that it's hard to break out of.
EDIT: I've always taken FU money to mean... you never have to engage in any sort of 'work' ever again, not just for a short time. In some ways, I've been able to use this cushion to say "no" to some situations/jobs/projects that I would have agreed to before, but it's not the same as saying FU to people. :)
I was like that for a while and went all in on FIRE type stuff.
The thing is that eventually, after I did take off that N months, I realised that it's unrealistic to assume I'd have no/almost no income for multiple decades.
I would go insane without having productive work, even if that were working for a non profit for a significant pay cut.
> Not 'working' means ... a day where savings isn't going up, etc.
This is true regardless of how much money you have. You're always going to be able to add some more income by performing labour, even if your investments outperform your labour after a point.
It's worth loosening the straps at some point, even if you just give someone else the money to spend (e.g. charity).
Being in a country where vacation time is paid by the company (currently 7 weeks / year, even if I usually don't use up all of it), the idea that taking a day off work means less money at the end of the month is mind boggling.
For example leaving one job and having a gap before another one, or getting sacked and having a few weeks without work, or moving town before you have something lined up, etc.
Basically, being able to function without income for a nonzero period.
I wouldn't want to use my holiday weeks looking for work more than a few times in my life even if I have quite a generous allowance (well, generous by 'normal people' standards, I find the idea of working >80% of the year quite odd)
[EDIT] weaker end in terms of ability to negotiate—so, the vast majority of workers.
It's also interesting to look at percentage of workers that work part time by country. US is relatively low at 22% while countries with a more generous welfare state are higher (France 39%, Norway 48%)
But there are a million other things going on as well so I'm not sure if it's related to that or something else
https://data.worldbank.org/indicator/SL.TLF.PART.ZS?most_rec...
Mandating a week off for everyone doesn't seem to give the space needed for poorer people to become as wealthy as they might deserve. What can be done?
If you want to attribute America's economic advantage to hours worked or labor regulations (and yes, they do matter to an extent), you have to be ready to explain why Russia, Mexico, Greece, and Chile aren't also economic powerhouses.
My personal conjecture is that you're in for a long period of degradation followed by something violent. Fascism most likely.
As I posted below - the situation in which you have 40 weeks of spending set aside is radically different to that of having 4.
From my perspective, and I recognise things are probably very different in the USA with your health insurance catastrophe, taking a few months off work to unwind, or check out the job market, or whatever else every now and then is a completely normal thing to do.
My first software job came about because I left a job and bounced around for a bit. I had enough mental space and time to physically visit interviews without the sort of typical "pretend to your boss you're ill" stuff. Without that time I'd be somewhere completely different now.
The real cost of failure isn't just loss of savings. It's potential homelessness, bankruptcy or death through less of health cover, or bankrupcty through student loan payments.
In a functional culture the cost of entry for small businesses is much lower, as is the Total Cost of Failure.
For a country that claims to be business friendly, the US makes it unbelievably dangerous to start a small business without the backing of a significant financial safety net.
It's the same thing, just on a different scale. If you own, say, one share of VTSAX (Vanguard Total Market Index) you now own, by proxy, 1.8% of one share of Microsoft stock. You don't have any direct voting or economic rights but because of the way a mutual fund is structured you get most of the economic benefit of that fraction of a share. I.e. you get the benefit of most of the capital gain and dividends that it distributes.
I would personally say that if you want to actually "own the means of production" then directly owning shares is the way to go, but if you don't actually care about making decisions for specific companies then you get most of the benefits without any of the day-to-day thought and worry by owning shares in a mutual fund.
Assuming this is not specific to Toyota, what does "owning" mean?
If I own one share of a company, it's incredibly rare that I have any say on any of the things you listed above. I usually do not get to vote on those. I also do not have any rights to the profits (in the US, but I doubt this is US specific). So in what sense do I own it other than the company writing me a piece of paper stating I do?
I mean, if I'm part of a joint venture with others to own a 100 unit apartment complex, I would expect to get some of the profit, at least. Likely about as much as my ownership stake. Shares do not guarantee this. A company can be very profitable, and just keep the money and pay you nothing, saying that "we think the value of the stock will go up and you can get paid that way."
I'm not anti-stocks or anything - I own plenty of them. But people should understand what they are and what they are not. And for most English uses of the word "own", it is not ownership.
You might want to look into REITs.
There strict laws about that sort of things even more so in places like Germany and the UK
1. You are not entitled to any of the profits of the company by owning stock. Not even if you own preferred stock.
2. You have virtually no control over decisions the company makes. And your vote may not count as much as someone else who has the same number of shares as you. Furthermore, you can have no voting privileges at all as well while owning stocks.
3. A company can devalue the shares you own by simply issuing more (similar to governments printing money).
Not only is all this legal, this is normal. For the average person, the only real reason to own shares is to hope the value goes up. In a few cases it is to get dividends from the companies that have a track record of paying out, but the RoR is not particularly good.
2 Well multiple share classes are dodgy that's why the LSE doesn't like them and you get kicked out on the index for that
3 Are you sure US companies can do this without passing a motion at an AGM to disallow premption rights ?
I suggest you look up what stock ownership means. Most wealthy people only own non-controlling interest in most of their investments as well. If you own a share of stock, you own part of the means of production.
Stock ownership traditionally means partial ownership of a business.
Except that you almost have no decision making power unless you own a lot of stocks, and that's not going to happen while working a simple middle class job.
It also doesn't mean that the company will pay you a portion of their profits. It is entirely up to the company whether they want to pay you a portion of their profits.
So you own something, but have absolutely no rights to the profits and practically no decision making power. In the spirit of the usual definition of "owning" something, you do not own anything with stocks.
If you don't, and your reasoning above is the reason why, I strongly recommend you reconsider. There is more to be lost by fearing your lack of control and failing to invest than there is by investing, in say, index funds.
I own stocks. My wealth portfolio is high in stocks. This has little bearing on my comment. I'm not recommending against stocks - in the US I've not found a better investment (real estate is worse).
I'm simply pointing out that the notion of ownership in a company via stocks is very different from what most people imagine. You own almost nothing, and you have virtually no control over the means of production.
Partial ownership is still ownership.
I would disagree.
I can sell those stocks I own and (hopefully) get more money than I paid for them. Sometimes they pay me a dividend too (share of profits). Sounds like ownership to me. I don't care about decision making power within the company. I LIKE that I have delegated that responsibility.
But yes in the short term the only way to gain wealth is to earn more money.
Edit: This assumes a perfect scenario, 98% of the time, that person making 60k a year ends up on social security barely making it at 67.
Let's leave things in "today's dollar" terms for simplicity: A 4% annual withdrawal from $1.4M would be $56,000, or a big upgrade over $26,4000.
A 4% annual withdrawal from $4M is $160k. But as you say, it's the equivalent of $56k today.
This is a lazy view, or a really privileged one at least. I know a couple of people in their fifties who have retired from putting as much money into the market as possible (post-tax and pre-tax) while living modestly through their younger years. Having enough money to retire early is having wealth.
Views like the one you espouse are insidious because they give people a justification to stop trying and spend everything they make. Why not get the $1500/mo apartment instead of the $900/mo one? If you can't build wealth, what's the point in trying to accumulate it at all?
Sort of. There's two pieces to FIRE. Saving aggressively, yes. But also by learning to live modestly, you need less wealth to retire. So half of FIRE is accumulating wealth, but the other half is needing less wealth.
It's not like people have to retire at that point either. The general idea is that they can do what they want and aren't tied to a specific field, career, job, and so on...
Have you seen what happened to wages since then? To the cost of living? To the cost of homes?
https://www.mrmoneymustache.com
Your point about wages stands, but even in the 50s there was no way the lower strata would have been able to retire early -- let alone retire at all -- or accumulate great wealth.
> To the cost of living? To the cost of homes?
COL and housing prices are not uniform. FIRE is going to be hard in San Fran even as a full-time Dev, but if you're making $85k in Des Moines it might be well within reason.
(Not that things also haven't changed since then, but it is a pretty big difference.)
>I know a couple of people in their fifties
There wealth as a token of who is winning some game: he who has the most $$$ wins (what I don't know - this is a religion question). You need to own means of production to win this game. If you are reading this, you probably have no chance of getting here, but is fun to dream about.
There is also wealth as in you don't have to hold a job to maintain your lifestyle. When you are young this is impossible (except for a few who inherit money or win the lottery), but if you live below your earnings and invest the rest well you can get to the point where you no longer need to work. (Some people choose to work anyway, others will retire)
Nah. I think it's views like the one you're espousing that are insidious, because they present the illusion that the difference between normal people and the genuinely wealthy is just a matter of some personal self sacrifice, rather than a set of fundamental policy failures that have lead to a collapse of social order and rising inequality.
Of course it's better, for them, if the masses are focused on index funds instead of the abusive effects of concentrated financial power on the middle class.
Ah, the convenient goal post shift to imply that people who retire early don't have wealth. Wealth is now redefined to mean "an amount of assets large enough to make a convenient political out-group".
if you have any disposable income, you can save for a decent retirement. it's useful to have a framework for deciding what indulgences you can pay for in the present without crippling yourself in the future.
People who typically become extraordinarily wealthy do so via high-risk, high-reward activities like business ownership.
Now you can argue that the risk reward equation isn't the same for people who have 20 million in the bank and 200 dollars in the bank, and that is very true, but it doesn't make the advice to spend as much as you can on investments incorrect.
Not if the person spends it all, like they did the earlier lower salary. Better beer, bigger TV, new cars, etc and you can easily blow through quite a decent raise.
Step 1: Be Radiohead...
The idea being that the hard part is getting to where you can even use the advice, and after that you're all but done.
Let's take an example. I'm going to use Swedish living conditions and salaries as an example as that's where I live but they are close to most European/western countries. We have a frugal grocery store cashier who makes $2000 USD/month after taxes. We have a high level executive in a medium-sized company who makes $5000 USD/month after taxes.
The grocery worked lives like a student (student loan/benefits in Sweden is about $1000 USD/mo) and saves the rest on the stock market (assuming average yearly yield with reinvested dividends at 8.5%), efficiently saving $1000USD/month for future non linear income. The cashier plans to stop working early at 55, at a net worth of about $2 900 000 USD. This allows for a safe withdrawal rate at about $10 000 USD/month. At this level travling/vacation expenses isn't a problem for the cashier. Housing probably does but they can most likely live comfortably even if they decide to rent. They can also easily increase monthly spending allowance by 10% if they decide to continue working half time.
At the same time our executive have been burning through every pay-check, and have effectively no net worth at the same age, sure there's plenty enough to lease a nice car, don't care about restaurants bills but more expensive traveling will still be a setback and vacation time per year is certainly limited as income is still linear to time spent.
So in this example we have a cashier ending up as a multi millionear set for life at 55 with no need to work a day more and a high level executive who'd be back at 0 without the job and a strictly linear income.
Sure salary increase does matter, but in the long run underspending matters more. With a longterm plan it's possible to become a multi millionaire with an entry level job, for instance there's a famous Swedish railroad worker who recently passed away who ended up with somewhere around $17 000 000 USD net worth at the time of his death, and achieved this by living under his expenses with a low salary and investing the rest, he initially turned to the stock market because he couldn't afford a house in his youth. Not Jay-Z levels for sure but well beyond what most people would consider very wealthy.
It’s certainly possible to live a comfortable life on the cashiers plan but if the executive spent just half of their career living like the cashier then he would quickly pass up the cashier on the wealth ladder.
Not "close" to most European/western countries. You may be really disconnected from normal people revenues.
> assuming average yearly yield with reinvested dividends at 8.5%
That's a big assumption.
> At this level travling/vacation expenses isn't a problem for the cashier
Inflation over 30 years then 20 more years of retirement may change this.
In the UK it'd be more like $1K for the cashier and $10K for the exec rather than 2 and 5.
> but they are close to most European/western countries
He was specific - Sweden. Just divide all numbers by some factor if you prefer.
Except that the most interesting part of life is over
The context is that we compare a life where
i) you save one third of your income and then start to flash money when you are 55, and
ii) you spend one third (or less) of your income on things that matter like finding significant other, having a family, making trips with your friends and family.
You cannot avoid spending 1/3 of your income without it affecting your life style. In extreme case, one can end up becoming a millionaire no one gives a fuck about.
Yet people live super-fulfilling lives with families making $50k annually. Find a job clearing $75k and you'll be golden.
You're defining the cashier by their job/role, as well as how they spend their money on saving for retirement. Textbook classism.
My anecdotal reply would be that I've made it to this golden age, I've earned far less than the average, saved more than the average, and still have a wonderful, interesting life ahead of me. I've married, raised a family, and had memorable trips with them.
Your last sentence is really indicative of how you view wealth and money; for many, becoming a millionaire is about stability and being able to provide for your loved ones, not to become someone that people "give a fuck about."
I didn't talk about cashier nor I defined any role. What are you talking about?
It looks like you was struggling the whole life and counted every dollar (see "I've earned far less than the average, saved more than the average"), do you manage to "to provide for your loved ones"? People rarely change, greedo.
I think this part is their point. Even you are looking backwards at what you have done, instead of future plans, implying the younger years are the more interesting ones.
I'm still not sure I agree though. I know this sounds lame, but I think creating a stable life with people you really care about is worth a lot more than the memories of traveling all over the world in your youth. my parents lived well below their means for most of my childhood, and they now have a stable retirement with plenty of money to go on whatever trips they want. sometimes they take me with them. as far as I can tell, they are very happy to be able to do this now with their family rather than having the memories of doing it in their twenties.
something else kind of shitty to think about: the real return on a diversified portfolio over forty years is somewhere between 15x and 20x (unless something major changes in the world). $5k spent traveling at 25 could be $100k less when you're 65. depending how much you made later, this could be a meaningful amount you won't have to leave to your children or help them with their goals.
A straw man argument. A) I said "for example". B) I didn't mean "fuck all, I am traveling", my primary message that when you saving all your after-ramen income you are missing things you will not be able to make in your 55+.
>> rather than having the memories of doing it in their twenties
Don't take it personal but how one can compare to something they didn't have? Quite possible that after investing in themselves instead of stocks they would have an even better time right now.
>> something else kind of shitty to think about: the real return on a diversified portfolio over forty years is somewhere between 15x and 20x
something else kind of shitty to think about: stocks grow with the same rate as the total amount of US dollars so in some sense your investments don't grow at all if we talk about the total pie.
What makes life beyond 55 uninteresting?
Now if you actually step back and move the early part of life where you can't do much you can see it's much closer to middle-age than it is to death.
There are absolutely things that you can do when you are younger that you cannot (or are much more difficult) when you are older. It doesn't make then necessarily any more or less "interesting", however - that's completely up to you to decide.
[1] https://www.getrichslowly.org/how-to-take-a-mini-retirement-...
[0] https://www.google.com/search?q=median+software+engineer+sal...
That's 100% best case scenario living a lifestyle that basically consists of going to work, going home, eating food, sleeping on the floor of their apartment (we didn't budget for furnishings but w/e it's better for the back) using the public library and walks around the park for sole avenues of entertainment. ALSO: THERE'S NO KIDS IN THIS SCENARIO. Some of those estimates I lowballed also (like food as that's average cost of groceries for people who also get calories from eating out at restaurants) so this is really not a realistic estimate here.
In reality though there's plenty of hidden costs that this person will incur and even assuming they do manage to stay kidsless they'll be lucky to put away $100 a month giving them a best case scenario of $250k in savings by 55. Not terrible for them, but not enough to retire on in the US when you think of medical expenses incurred later on in life.
It wasn't glamorous but I managed to afford a small apartment, I kept my food budget at an average at $100 a month including a restaurant visit or two by good planning I could keep most meals under $1, I would take the buss out to wholesale food retailers and buy semi bulk, I went to the cinema every now and then, I had internet, smartphone (with some data), computers, furnitures, I went out drinking every now and then, I only bought high quality clothes on sale and no cheap wear and toss from H&M, I traveled to other countries once or twice a year for vacation and visited family across the country every now and then (would go when prices were low or buy cheap tickets 10 minutes before the train departs with leftover seats). I had a good (and frugal) quality of life in the countries second biggest city of the country and didn’t experience any significant difference in happiness from living on twice that now. Main difference is that I travel more (less flexible and more expensive) and eat dinners at Michelin restaurants every now and then.
I could have made a case with a even higher earner living even more lavish, racking up credit card debt and payday loans, buying stuff on installment ending up even worse with debt interest eating up much of the cash flow, here I simply compared someone living under their means with a higher salaried person living at their means (never beyond).
A pre-tax yearly salary living wage to cover the minimum in the US would be $45K - $68K depending on location. Let's look at a low end, low cost of living state. $45K pre-tax translates to about $3K per month take home pay. Which means that if you had $3K per month take home, you would just be covering the basics for a family. If you are trying to get by on $2K per month, you're already making some difficult trade-offs to survive.
So, I don't think it's realistic to say someone with $2K per month take home pay can save $1K per month.
I ran the numbers quickly for $ 68k/year you'd be in the top 3% earners all ages in the entire country enough to put you well beyond the public pension roof, on the edge to put you into the highest ultra high earner tax bracket (70k).
So I guess a poor person in the US would be part of the ultra rich in Sweden and I'd be poor beyond salvation in your country, living on ~1.5k/mo while bootstrapping my company.
I’m not sure why people see that an attractive way of spending their life.
The first few years, maybe the first decade, are tough. After that, it becomes self sustaining: you eventually make more in gains (unrealized, ideally) than you do working.
For a lot of educated types, the best chance of really climbing the wealth ladder is early involvement in a startup. The startup founders I know have a single unifying factor, they come from the sort of wealth that allows them to go completely bankrupt and still live comfortably.
We have good incomes and live pretty frugally, and for us that translates to a decent amount saved for retirement and college funds. I would never knock that, that we are incredibly lucky and a lot of people work very hard for less. But it doesn't move us up a class such that we have a house overlooking the beach and kids in 20k/year private schools. I know people who have those, and they didn't work their way up a ladder. Their ladder started on the 10th floor.
Sure if you are on minimum wage then there are probably some easy gains to be made but for someone in the middle of their career they are far more likely to improve their situation by saving rather than getting promoted. That's not to say they shouldn't try but you have to realise the odds are against you getting to the top.
If you are looking at it from the perspective of starting a business then having some savings is going to make it far more likely. You aren't even going to have the mental energy for it if you are spending all your time thinking about how much to pay on the credit cards each month. This is the reality for many people, possibly even the majority.
Quite the opposite: the pole is greasy at the bottom, but becomes easier to climb the more you manage to climb.
The reason it's greasy at the bottom is because there are fundamental systemic factors at play that make it very difficult for poor people from making their way up. For example, here in the USA you cannot open a bank account if you don't have a permanent address, and you're likely to work multiple jobs with constant changes in schedule, and lack of easy transportation options to travel from one to the other.
Once you reach middle class though, the relative stability it provides can allow you to make decisions to climb the ladder further, if you choose to do so.
I agree with most of what you say here but I'm not so sure of this bit. Of course, if you get handed huge amount of cash by a rich relative, that's the easiest way to live comfortably for some time, but it won't come with the financial skills to make the cash an asset instead of just a possession.
Assuming you don't win that lottery (or indeed win the actual lottery, $100 million powerball style), I think the best way to climb the ladder is to own a business (as per your 'small business owner across the street with the McMansion and the gaudy Christmas decorations'). Receiving cash is like getting a push on your billy cart, it's nice but it doesn't, in itself, give you a way to get more. A business is like an engine for the billy cart, maybe it won't be going as fast right away but it'll keep on going and generating money.
Either way, as you say, scrimping on groceries will never make the difference between wealthy and not. Wisely investing your salary in real estate or stocks won't help either, except over timescales too long to have any fun with it or unless you're at the very top tier of a FAANG-type company. A business is a machine to make money and unless you own one, you're highly unlikely to end up in the same financial class.
People with mid 8 figure liquid net worth, ex: $50-70,000,000 do not need to have any income for extremely long periods of time without having any large negative effect on their spending ability.
It is harder to accumulate capital but still worthwhile even if you can only do it slowly.
But level 6 will require taking risk and that risk paying off big-time. Usually it requires taking several risks. Jay-Z got from level 1 to level 6 by taking the risk of going public with his craft. He decided he would put in the work, make the connections, and not fear the rejections.
The reason entrepreneurs get rich is they take the risk.
There is some luck involved but most people (me included) aren't willing to risk their current level to level up.
This is also my main take away from "rich dad, poor dad" (the book). It is so simple, yet I was so blind to this for a long time.
I think thousands of people in the valley who made their money from stock options / RSUs will disagree with this
I don't know what feeds into the other. Is my taste for recklessness a result of my implicit knowledge that I can generate a good sum of money when I need. Or am I waking up everyday and putting in the work in order to satisfy my reckless side? What I know for sure is that one can deliberately climb the ladder. And the undisputed "best way" to climb the wealth ladder is to generate (not receive) income. There are many ways to do that. Usually employment isn't one.
Well yes, but...that's completely useless advice and the article is considerably more concrete and useful. (On the other hand, I'll dispute his 1-basis-point: I think it should be closer to .1 basis point.)
You are right about the difference between income and net worth. To a point, anyway.
I feel very wealthy, though in the scheme of things I am not.
Even worse, a football player with a 20million dollar contract is likely to end up broke if they instantly maximize their spending. However, if their lifestyle is based on their savings account that’s going to quickly grow to match that income.
The doctor, or any professional making that much, simply needs to turn in the lease on the luxury car, or downsize their house, or cancel their vacation to materially change their financial circumstance.
A person truly living paycheck to paycheck has to choose between eating or paying rent and there’s no luxury car to sell or turn in to free up cash flow to make that decision easier. They are very much resource constrained.
This isn’t to say I don’t believe there are professionals in this boat. I just believe we need a different term for it as it’s not fair to lump these two very separate groups into the same definition. Perhaps describing them as living beyond their means.
What’s being described is a massive dependence on continued employment, and someone with 200k of student debts and zero net assets easily qualifies.
Almost all of the world is living paycheck to paycheck by your definition. The majority of US households would be ‘financially fucked’ if their wage income was taken away for a significant period of time.
"paycheck to paycheck" means something like no liquid savings and no positive cash flow. there are certainly a lot of people living this way (especially in less wealthy countries), but it's not "almost everyone".
There are lots of people making $200k+ living paycheck to paycheck. If the most basic discussion about cost of living is going to blow your mind then just exit this discussion.
If you wanted month-to-month rent in my building in San Francisco (as opposed to a more typical yearly lease), it is $11,000 per month, with yearly leases being about half that.
People that only make "$200k+" via wage work aren't living here, just like I planned and the networking opportunities are pretty amazing.
Meanwhile, I know a number of Bay Area grad students who still get by on a salary of $30,000, and even they wouldn't say that they're living "paycheck to paycheck" for the most part.
There are also people living up and above their means and want to stay there
There is already a separate terms to describe people who live paycheck to paycheck to cover essential living expenses, it is called poverty.
I think the difference is that people like that have a MUCH better safety net in the form of family and friends who can easily provide $5-10k handouts to get a family out of a jam. (Then of course you have the people that are already abusing THAT source of funds. Even though they are making $250k).
You would be AMAZED at how close to the edge people live at every income level. It's like a part of human nature to do it, regardless of whether one is a millionaire or a pauper.
Overspending is not an excuse. When you only need tens of thousands of dollars to live and thrive, anything beyond is excessive.
I know my peers that overspend, I weep for them. I don't envy the limo you take, I feel bad that those things are where you find pleasure.
Maybe it’s being poor since childhood or the first generation immigrant frugality.
Surely, most folks will never reach Level 3 on this chart. While this is an interesting way for someone who has made significant increases in their income over the years, I don't think the thesis holds that the best way to increase your ladder is to just save money.
We're all (or mostly all) wage earners here. Whether you are making $15/hour at a fast food gig, or $200+/hour as an engineer, you aren't going to save yourself into a new level. Saving might take some pressure off, and make you a little more comfortable within your level, sure, but for most people, it isn't reasonable for them to save 10 times the money they already have liquid without changing their income.
The idea that we're all just a few 'steps' away from being independently wealthy is one of the worst parts of American culture in my experience. The individualism that follows from "if I can just outcompete someone else" seems to me to be the root cause of things like a general anti-labor sentiment, minimum wages as low as $2.13/hour, etc.
The first step is to eliminate debt and don't make stupid purchases. Debt includes credit card, personal loans, car loans, and mortgages. Stupid purchases are things like expensive vacations, eating from restaurants all the time, or buying new cars, or buying boats. That sort of thing.
Pretty much: if you buy a brand new car you are a moron if your goal is to increase wealth. You want to do things include living in inexpensive neighborhoods, having secondary sources of income, having no adult 'children' and so on and so forth. Woe is to parents that are still paying for their 20-somethings.
If you go drive around your city and you want to see were "middle-class millionaires" live you need to avoid the 'wealthy' neighborhoods. Look for the 50-something living in a older neighborhood driving older economy cars around. These people are going to have very low credit scores, as well. The best of them are going to have a credit score of 0, which means no credit history for several years.
Do you calculate the cost of purchases by how many payments can afford in a month? If so you are doing it wrong. Instead you should only ever pay cash. If you don't have money in the bank to pay for it you can't afford it.
The S&P 500 has, historically, provided a 12% return over average 20 year period. If you start off at age 30 and invest 500 dollars a month at that rate it would take you about 26 years to make your first million dollars.
6 years after that would be your 2 million dollar mark. 3 years later would be your 3 million dollar mark. By retirement you would have just under 4 million dollars.
If you make $50k dollars a year then that amounts to about 12% of your income.
You think that is too hard?
The average car payment in the USA is at $550. The average credit card debt is $4,717. At 15% interest and doing minimum payments at $189 that card is going to take 10 years to pay off and $22,869 in total. That means that for every 1 dollar you spend the bank makes 4.
If you can afford to make banks rich you can afford to make yourself rich. Just can't do both at the same time.
Median income in the US per person in 2018 is 35000$. 500$ a month is 6000 a month, or 17% of that before tax. At that income level you probably don't have any income to spare after housing + food + car + health care.
I'm all for saving and spending responsibly, but I don't there's a thin line between doing that and being miserly. Everyone needs to have a goal for themselves for how much "enough" is, work towards it while still living their lives (even if the goal is asymptotic)
> Anybody with a middle class income can do it.
This seems obviously false to me. Let me construct a reasonable case for someone who is middle class income but who I do not believe will be able to meet your savings goals.
Let's assume a single parent, at the median income level of $31,000/year living in Seattle. That gives them $2,500/month to cover food, housing, clothing, childcare, medical care, etc. Rent and health insurance probably eats 1,500 of that alone. To say nothing about saving for a kid's education, buying them school supplies, etc.
Even if you scrimp on food, clothes, etc. you are going to have a real hard time consistently setting aside $500/month.
http://www.commerce.wa.gov/wp-content/uploads/2019/03/DRAFT-...
https://www.seattletimes.com/seattle-news/data/seattle-media...
[1] https://www.census.gov/quickfacts/fact/table/kingcountywashi...
Try again. In 26 years your $1 million in today's money is worth $526,235 assuming 2.5% inflation, and is easily vanquished in the U.S. with any major health emergency. On an average salary you'd have to save and invest 40-50% of your income to have any sort of meaningful effect long term and even then you have to hope you don't hit any unexpected emergencies. The penalty in the US for being poor is to pay more for everything and always be poor. The privilege for being rich in the US is to pay less for everything and always be rich. There is no upwards economic mobility via savings on an average salary in the US. Not even close. The only path to serious wealth in the US is by owning a ridiculous amount of capital, typically by birth-lotto, and leasing its usage.
My experience directly contradicts this. Large increases to your wages allow you to save money into the next level or make a move that increases your wages further. I doubt it works for everyone, but it worked and continues to work for me. Although I don’t think I’ll get to their level 5, and even if I do, I’m going to be cautious about spending on vacation.
The defeatism that follows from, “I can’t possibly ever afford a home, etc.” is one of worst parts of American culture these days. People use this to make poor decisions throughout adulthood and then pretend it’s evidence that it must be impossible for anyone to get ahead by not blowing money on “avocado toast” and travel.
The thing I notice most is a lot of people buy cars (and replace them frequently) that are way above their "level" and represent hugely irresponsible decisions.
E.x. you should be way into 7 figures of wealth accumulation before you start leasing/buying $50-70k luxury cars.
You never know what someone's stock portfolio/401k/IRA whatever looks like but it's always an eyebrow-raiser for me to see someone drive up in an expensive car and then they later tell you they pay rent and have never bought property and the longer you talk to them the more you realize they're probably living paycheck to paycheck.. just with a relatively large paycheck that disappears nearly completely.
Especially when the trendy area to rent gets you a small studio or 1BR apartment for $2.5-3.5k/month and that's enough to pay the mortgage on a $1M property within 10 miles of said apartment.
If you negotiate with a couple of banks in Sweden you can easily get sub 1% (0.79% is what I seem to be able to get). Heck I just checked my bank and I can even get a line of credit up to 1M SEK at 1.74% for up to 50% of my portfolio without any property as security.
This is only true if you have no debt. Even in your low-end example you need a net worth of 250k, which is a non trivial amount of money for most people. And I would still call it naive, it's just not enough.
Financial independence to me is, having other assets than your time which will pay for your most basic needs. Living in a van probably means doing a lot of stuff by yourself, which requires a lot of time.
I would disagree with your financial independence definition though. Basic needs threshold is much lower than 'comfortable' living. The traditional definition of financial independence is not having to work if you don't want to. What that looks like (the sacrifices you make) depends on the person. Maybe to be financially independent you are cool with a $500/mo apartment and Ramen... or maybe that means a mansion and a bunch of supercars. Either way, if you're dependent on a job or someone else, you aren't financially independent.
Certainly you can find people who would feel miserable with that amount of money, and people who could thrive on a small fraction, but it would give most people a freedom that very few ever get.
>the best way to climb the wealth ladder is to spend money according to your level.
This is directly contradictory to, and detrimental to, how the US Economy expects its consumers to act. Credit has largely filled the gap of wages and productivity such that consumers now have no real sense of their level of real wealth, only that which is projected by their ostensible plastic card based opulence. The authors capstone to the article declares paradoxically at the end, "there is a lot more to life than saving money." so I suppose the siren call of conspicuous consumption remains a cornerstone of their life as well.
id also cynically argue that level 6, philanthropy, has less to do with having a profound impact on the world around you and more to do with dynasticism and displacement of the state as an agent of change or agency in society. people at this level of wealth have a need to extend their name to objects of gravity an institutions of permanence and prestige. They are so far removed from the society as a whole that any perceived generosity in the pursuit of a just and verdant society is merely a facade for tax evasion and self grandeur. They realize no meaningful other symbiosis or benefit from the society as a whole in which they are mistaken to be a part of.
I would argue that the best way to climb the wealth ladder is to spend below 'your level'. Keeping up with the Jones' who are doing their best to display their achieved status is an excellent way to end up just like they will at the end of a long life of hard work: in hock to the bank for their primary residence and with little to no savings.
Spend less than you could, pay off your primary residence as fast as you can, re-invest whatever you make after that in real estate and the stock market if you have an appetite for it, make your money work for you. Simple rules, nothing flashy and at the rate a typical IT worker can make money it won't be all that long before you will have a nest egg that you can retire on, provided you continue to control your spending.
If you have your interest locked down for an x period of time and you intend to keep your property always ensure that you can pay off enough of it to be able to continue to live there even if interest rates go back into the 5-10% range.
The rate difference is so large that if you are a good earner that it could very well make sense to go for a much shorter fixed rate term. There are many different products ranging from free floating all the way to 30 years, depending on the age of the borrower 30 years fixed might not even be available to them.
https://www.abnamro.nl/portalserver/mijn-abnamro/hypotheken/...
The 10 year fixed term is right now better than variable (which is pretty odd for this market), the 30 year rate is at 2%.
Typically first time home owners will choose for the longest periods and second ore later buyers will choose shorter terms depending on their income generating capacity and expenses. The other bigger differentiators are whether or not a payment on the principal is required each month and whether or not you get 'NHG', a warranty construct resulting in lower interest.
The trick is to do good for the world long, long before then. You shouldn’t need to be wealthy to volunteer a few hours a month..
Before anyone judges me negatively, I say this as someone who has spent the vast majority of my lifetime trying to “climb a ladder” only to want to get to a point where I can give my resources away for free to help others. But I have never figured out how, and then one day it just struck me, why can’t I jump to level 6 now without the money, and maybe that might just be what’s wrong with the money driven world somehow, or at least my understanding of it.
I feel like if I could understand how to not care/worry about the money then I could free up the mind and energy to do something better for the world, and I want to.
And then I realize the counterpoint that we have to work within the rules of the system, too, and the system is much more cruel and demanding than I wish it was.
The is a paradox in 'climbing the ladder' and giving away financial resources. Simply because, in the competitive market, you aggregate resources by taking it from others. Either competitors or random individuals. Philanthropy should start giving away those resources to the actors most in need, and they may be very close to your activities, but then you can't aggregate and climb up. The market doesn't have sympathy, and lack of resources can be devastating during tough times.
Don't climb the ladder. Who cares.
That's a really fun read. I had a great time playing "spot the behavior of parents/relatives, described as if he knew them personally" (all of which fell somewhere in Prole or Middle, for the record, so nothing to brag about, particularly in the latter case—oh boy, the poor, sad, misguided Middle)
Interesting lens through which to view Trump—does he ever have some weird displayed-class-markers. He reads as the most Middle and entirely un-self-aware and unobservant person possible, who's also won the lottery so all of that is on extreme display. Like a parody of the Middle. It's so strange. It's gotta be just a perfectly-maintained act, right? Given his upbringing it makes no sense for it to be natural, AFAIK. Utterly bizarre.
Lots of subtle observations in there that really do seem to match reality. The "mirrored surfaces signal you don't clean your own house" thing—that's been a fun one to watch out for. I felt very proud in a totally raised-Middle way that I knew the obelisk thing among the Upper-Middle and Upper was aimed at oblique association with Paris rather than Egypt before he got to the reveal, hahaha.
Some updated version by a similarly-observant person would be awesome, but Class is still remarkably accurate given how long ago it was written.
Other than that, this is basically a base 10 view of wealth. Each zero matters as much to you as the last one. Under that theory, Bloomberg is to me as I am to someone living paycheck to paycheck, but I feel much closer to the person living paycheck to paycheck.
There are three steps on the wealth ladder:
1. Wage slave - Most people will never leave this step, no matter how many ugly Merc SUVs they own or first-class flights they've taken.
2. FU Money - This person has enough money set aside to walk if they don't like a job or a customer.
3. F-Everyone Money - This person doesn't need to work at all.
Most people are on a treadmill just trying to make it and life always sends them back to the beginning.
Some people seem to have these sort of problems more often than others. I guess poverty is about a lot more than lack of money.
About 6 months ago I had to get a new alternator and brakes, total cost was ~2,800 as my car was past warranty. I just paid it, got the dealership rental car for a day ($50 per day) and went about my life. If I did not have the money, they same thing would have happened but I would not have been able to get it fixed and would have had to desperately reach out to people hoping to borrow money. If I happened to have just enough to fix the alternator, I would have had to drive around on very worn brakes potentially leading to an accident in the future, putting me back at square one. I would have had no choice though as I would not be able to afford not going to work.
Not to mention I would not have been able to afford the rental meaning I would have had to spend the whole day at the dealership, missing a day of work and probably that pay.
It is very expensive to be poor.
In the US we've been living in the Golden Age of travel and credit card rewards for the last decade. I started churning cards in 2012 and have not paid in full for personal travel since. It's become slightly harder to churn than it used to but the sign up bonuses and earnings on cards is still at highs nonetheless.
It's great because I'm not a materialistic person and don't spend much on physical goods anyway, and to get my travel mostly paid for means I haven't had to spend my own money despite being in the "travel freedom" step of the equation.
I wouldn't do it if I were in the market to buy a new house in the next ~12 months but otherwise a small temporary dip in your credit score has literally zero impact on your life.
The six levels:
Level 1. Paycheck-to-paycheck: You are conscious of every dollar you spend. This includes people with crippling debt.
Level 2. Grocery freedom: How much specific grocery items cost don’t impact your finances.
Level 3. Restaurant freedom: You eat what you want at restaurants regardless of the cost.
Level 4. Travel freedom: You travel when you want, how you want, and stay where you want.
Level 5. House freedom: You can afford your dream home.
Level 6. Philanthropic freedom: You can give away money that has a profound impact on others.
I give away money that has a profound impact on others (so I'm at #6).
But I can't afford my 'dream home' (#5) (I'm within an order of magnitude, I suppose).
And #4 doesn't even interest me (I actively don't _want_ to have a private jet or whatever).
I can take a holiday pretty much whenever I want, if that's what it's getting at? I think very few people actually travel "how they want".
I think this is based on a very narrow, 'hollywood star' style of lifestyle. You don't need to be stupidly rich to give 10% of your income or to take a sabbatical from work.
I don't believe his intent was "private jet" it was "you can pick first class without concern and you don't have to look at the hotel/rental home prices."
House freedom is way below that.
There's an inbuilt assumption that you desire extravagance, which inevitably places philanthropy last. My point is that it's a choice.
#4 would mean I don't price shop Airbnb, hotels, and plane tickets so much. Or maybe I just take first class everywhere. Either way, you're talking spending amounts in the $10k+ range.
#5 means you can buy whatever size house you want within limits. That's more a $1M+ decision (although, amortized out long term)
#6 means Bill Gates level philanthropy. Not saying whatever donations you're giving away aren't meaningful, but I doubt you're getting wings in hospitals named after you.
It surprises me how philanthropic individuals are sold as benefactors who are a solution to solving problems linked to lack of resources, for those in needs around the world. I think it rather servers themselves instead, an effective PR routine that comes with decent guilt therapy.
It's one of those things like "expat" sounding all so good compared to those job stealing "immigrants".
Maybe we should all give a portion of our monetary power to those in needs, displacing what we would normally give to Unilever-like producers. It would skip the inefficient intermediary.. I digress.. The scale ain't right, but the idea is spot on.
Either that, or you're assuming that the reasonable benchmark for comparison is close to the absolute most expensive example within a specific sector, which doesn't really match how I spend money.
Thinking about it more, I'd probably say I even hit #4 before #3. Why?
a) I don't really care that much about eating out, so despite being able to theoretically afford "Super Fancy Meals" I still think about it because I could just give someone else that money instead.
b) First class flights and fancy hotels I find ridiculous, they don't factor into my purchasing decisions. I far prefer a cabin in the woods or going hiking or something like that to some constructed notion of luxury.
I'd sooner give $10k to charity before I take a first class flight - in fact I'm on track to do that this year, and hope to increase it. If you don't count anything below $millions as being philanthropic then of course you've defined level 6 as being the top, that doesn't make sense to me.
Wanting a cabin in the woods and being able to afford it does not make you "House freedom level". That level is being able to buy any house you could want without second thought.
The fact that you would not choose such a house is completely irrelevant to this train of thought. Some things you have to plan out and some things are just not worth to consider for even a second.
I don't think "any X I could want" is meaningful.
You're taking it presumably to mean the most expensive offering that exists in the world, but I _could_ want something akin to Buckingham Palace and no amount of money would get me that, or I could want some generic massive palace that would cost $50bn which obviously is above the philanthropy level by any metric, or maybe I genuinely do just want a bog standard terrace because I'd rather give my money away than 'elevate' myself into a weird Hollywood lifestyle.
It makes far more sense to think about what I actually _do_ want, and in that view the levels can be ordered differently depending on the person.
The point I am making is that to some extent these levels are individual choice, they're not cast in stone.
Your example of saying you don't care about fancy meals... well, sure, but that doesn't change the fact that your price sensitivity to a restaurant is going to be much lower than a vacation. If your end goal is to give a bunch to charity, then scrimping on a vacation too would be a better decision ultimately.
It's really hard to spend more than say, $1k on a meal. Even 3 star Michelin restaurants don't charge that much unless you include alcohol.
Comparatively, it's EASY to spend $1k on a vacation. Incredibly easy.
Dropping $10K on a vacation without thinking about it? No, I'm not there. Taking the vacation I want without thinking about the cost? Easy - I just don't want that kind of vacation.
"Travel" can mean grey hounds and motels, or first-class flights and luxury hotels. Philanthropy can be donating $100,000 or giving a buck to a guy on the street.
The key take away from the article, at least for me, is how much you flinch at extra costs, and that being about 0.01% of what you have in the bank.
The idea that you must first have your entire life laid out with a massive house and first class flights and stuff before you start helping others is deeply wrong IMO.
Kind of like the old saw about only the poor are "crazy", with enough money you become "eccentric".
What I see with most people around me,who stand at a low level: - spend most if not all or even more than what they can afford. - far more obsessed with getting more money than adapting their expenses. Of course they have no clue how to make more money, so they don't end up financially happy at all.
I think it's a great article as it put things rather simply.
I currently give at least 10% of my income but my aim is to get back to giving 50% again.
Join others who give at least 10% https://www.givingwhatwecan.org/
You should disclose your affiliation with this website.
I'm not quite sure why it matters whether I've taken the pledge or not though. Could you elaborate why I should disclose this explicitly?
Also disclosing affiliation seems sensible if I'm promoting a product and I'm going to benefit from others purchasing it. Here I'd be thrilled for more people to join in, but this is akin to telling others about an opportunity to volunteer. Are you thinking there's some conflict of interest?
I'm really curious -- thank you for your time.
The way you wrote the sentence really looked like a product promotion, especially to someone (most of us?) who doesn’t know GWWC. Based on your response I don’t think there’s a conflict of interest, but I needed your clarification in order to think that.
You likely: * commute to work every day * work 8+ hours per day * spend weekend hours doing choirs (laundry, grocery shopping, etc)
Sure the size and comfort (of house, car, food, etc) may vary, but you have a similar day-to-day life as a waiter, just the job and numbers are different.
Nit-pick: There are plenty of cultures where barely middle-class families hire others to do their chores.
For example, say you have the chance to bet on a single flip of a biased coin that comes up heads 51% of the time. If the coin comes up heads, you win $10,000; otherwise, you lose $10,000. According to the Kelly criterion, this bet only starts to make sense once your net worth is at least $250,000 [2].
[1] https://en.wikipedia.org/wiki/Kelly_criterion
[2] https://www.wolframalpha.com/input/?i=solve+0.51*ln%5Bx+%2B+...
In other words, if someone is frivolously spending their money on luxuries they are very definitely not wealthy. They only want to appear wealthy. The true wealthy really don't look wealthy. They never really leave level 1 on the chart.
It's exactly this kind of get-rich-quick crap (that always seems to revolve around heavily leveraged real estate) that was one of the causes of 2008
I also liked the Rat Race game. I used to play it with the kids. One thing he had you do is pick a goal of what you wanted to do when you retired. I always picked saving a forest and my daughter always picked a small farm. We compared notes recently and realized that we have both reached our goals.
Move to a country where US dollar goes a long long way. Like Tim Ferris said: What would you do if you had a million dollars right now? Most people don't know. The tragedy is most people don't have any passion. All they do is keep calculating their net worth day in and day out. Happiness is not eating some expensive meal. It is continually growing and having some fun. Most things that are enjoyable aren't that expensive.
You can go snowboarding at whistler even if you don't have a lot of money. You don't need to own a house there, just get an airbnb
The rest of the article is not very useful. The higher one's liquid net worth, the more differences in priorities and consumption patterns.
You can go on a holiday flight to another country for a few hundred dollars. Or you can rent a private jet to tour the world, staying at a 5-star hotel each place. That could easily be the difference between a 3 figure price and a 6 figure price.
Houses, you can get them for a few annual average salaries, or a few hundred. Depends on where you want to live.
And donations can vary as much as you like, a dollar or 100M.
For software devs, I would think the real ladder is not whether you can buy the groceries you want. My guess is most of us in the West can buy the truffles every week if we really felt like it, and likewise with restaurants.
What you perhaps want to consider is whether you have the resources to not work for a while, whether to educate yourself, travel, or do your own startup. This comes down to the opportunity cost of lost income being worthwhile to do those things.
I realize that I am objectively much higher on the wealth axis today, but this is what I tell my children. Live without needing much and do not worry if what you really want is 500€ more expensive.
I like this chart because it also tells that some people can be happy by buying the 15€ fast lane at the airport (this is what we did with my wife, the kids queued up). Or getting the 500€ more expensive version of vacation to have more space.
Although the person overspending is probably using credit or living paycheck to paycheck, there is the rarer but more acute problem of windfalls. If you receive a windfall without previously having experience with money, there's a good chance you will fritter the windfall away.
A common way this happens is when professional athletes overpay for a mansion after signing a contract. Five or so years later the mansion is sold for a huge loss or sits on the market for years with an unrealistic selling price.
I don't agree with this. I think life satisfaction is a function of what you think you need rather than what you really need. Changing that perspective can create as much contentment with existing resources as increasing consumption. For example - no one misses what they never knew they could have. Very few people come up with a _necessity_ for a private jet from first principles.
On the first example of levels, it's funny that 'guys that can eat where they want' are on the same level (3) as 'billionaries'.
Then goes on with the very old (and wrong) belief that for a high net worth individual 50K is chump change and equivalent to a normal guy throwing away a dollar ...
Then the "improved" levels do not really make sense as levels: travel freedom can be much more than expensive than house freedom, for sure!; also, one could engage in a philantrophic cause without belonging at the absolute peak of wealth.
Another one is how at the highest level in his chart, he uses the expression "What are prices?", implying that people at the highest bracket just do not look at price tags anymore. Honestly, plenty of rich people live fairly frugal lives, while on the other end plenty of people at the bottom spend in a lot of things without thinking twice about the cost and its impact on their lives.
And then there is no advice on how to actually climb such arbitrarily defined ladder ...
Letting the rich decide how society is organised, what a great plan.